UBS Expected To Pay $1.5B Fine For Libor-Rigging

Switzerland's UBS is set to pay the second-largest fine ever levied on a bank Wednesday when it admits that a group of its traders rigged Libor interest rates, Reuters reports.

Zurich-based UBS will pay around $1.5 billion for the manipulation of yen Libor between 2005 and 2010 by 36 of its staff around the globe, a source familiar with the matter told the wire service.

The fine against UBS, whose spokesman declined comment, would be the second-largest paid by a bank and comes just a week after Britain's HSBC agreed to pay the biggest ever penalty - $1.92 billion - to settle a probe in the United States into laundering money for drug cartels.

The UBS settlement will be with U.S., British and Swiss regulators, although the last has no power to fine the bank. Japanese regulators are also involved, some sources have said, although it is not clear if they will be formally involved in the penalties.

UBS will admit to criminal wrongdoing by its Japanese arm, where one of its traders manipulated yen Libor and euro-yen contracts, sources familiar with the matter have told Reuters.

UBS's settlement would be more than three times the $450 million levied on Barclays in June for similar misdeeds in the setting of benchmark interest rates, indicating the wrongdoing at the Swiss bank was more pervasive.

The fine would widen an expected fourth-quarter and full-year net loss, which UBS already flagged in October when it announced 10,000 job cuts and its withdrawal from many fixed income and trading activities.

But the penalty is not expected to undermine UBS's capital ratios, a key goal for the bank following its investment banking overhaul and return to private banking roots.

Even after digesting a $1.5 billion payment, UBS would still be among the most strongly capitalized banks when factoring in much tougher capital rules that take full effect in 2019, Reuters reports.